Simon Read: Facebook and PayPal may be about to cash in as people get more fed up with high-street banks

 

Which? says the unfair current account market is long overdue for a shake-up. It called this week for the Competition and Markets Authority to refer current accounts to a full competition inquiry.

Explaining why, the Which? executive director, Richard Lloyd, said: "Low switching levels and a high level of complaints show the unhealthy dominance of the biggest banks is set to continue and this market is not working in the best interests of consumers.

"We estimate only 4.2 per cent of people will switch accounts this year. Unless we see an injection of much-needed competition into the market, the major high-street banks will continue to have a stranglehold."

That needs to change. But there are more positive indications that financial services will sooner or later be snatched away from the high-street banks' stranglehold.

The biggest news this week was the reports that Facebook has plans to enter the arena. The social network isn't apparently intending to take on the banks directly, but instead will provide remittances and electronic money. To put it simply, the internet giant will give its users the power to transfer cash between each other.

That sounds like quite an attractive prospect to me. The chance to click on a mate or family member on Facebook and transfer cash to them, either as a gift or because you owe it to them, could be hugely convenient.

Paypal is already a giant of payments in the internet world and appears to have partial aspirations to take on the banks. In fact it is already vested as a bank in Europe, in the tax-effective country of Luxembourg.

It's also moving fast into the world of payments on the high street, with Paypal already having signed up more than 2,000 UK shops and restaurants to accept its smartphone app as a payment method.

Moving money around is the main reason why most of us use banks in the first place, so switching loyalty to internet firms may not be too far away. That's especially likely given the continuing low levels of trust that the big banks have among consumers. Are the internet firms more likely to be trusted? Despite Facebook's many mis-steps, such as concerns about personal data mining, it is still seen as a relatively trusted company.

Paypal, too, has had criticisms, not least for its actions in locking up people's cash for months on the slightest suspicion of fraud. But it has worked to improve its terms and conditions and many millions use it every day with no complaints.

So both are likely to be well placed to seem attractive to people fed up with rip-off charges and poor service from their bank.

However, privacy issues will remain important. If Facebook is seem to be further abusing its position as the holder of billions of pieces of personal information, then it will kill its chances of becoming a trusted provider of financial services, even if it just turns out to be money transmission. For instance, recent research showed that prospective borrowers were disgusted at the news that lenders, such as Wonga, use social media as a means to make a decision on whether to lend to them.

The research for Amigo Loans showed that seven out of 10 borrowers are unhappy about the practice. More than a third said it made them angry, labelling it untrustworthy and an invasion of privacy. And in a clear warning to Facebook, almost half said they would consider deactivating their social media profiles if they discovered such a breach of privacy.That's something the big data firms and social networks must consider before driving away their users by exploiting them too much.

s.read@independent.co.uk

Twitter: @simonnread

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Sport
Romelu Lukaku puts pen to paper
sport
News
Robyn Lawley
people
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
PROMOTED VIDEO
News
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
i100
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

    £450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

    Senior Analyst - ALM Data - Banking - Halifax

    £350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

    Java developer - Banking - London - Up to £600/day

    £500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

    Day In a Page

    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star